Businesses Told To Expect Little Federal Help This Year

Visitors To Congress Hear Gloomy Message

WASHINGTON -- New England business leaders heard sobering news Wednesday from members of Congress: Expect little help for the region's battered economy this year.

Members of the New England Council, the region's leading business group, are in the capital for two days of lobbying for federal help to boost the economy of the six states. But members of Congress told them there would probably be little direct aid for New England.

"The economy could soar in this country if we could just release it to do so," said Kerry, a leading supporter of a bill to cut the capital gains tax rate for businesses..

Kerry and others believe the New England economy is hamstrung by a number of federal policies, notably the continuing credit crunch. They still feel that crunch is exacerbated by overly tough regulatory policies, and council members will address that topic today in a meeting with Connecticut lawmakers.

Tight credit, council members said Wednesday, makes it hard for businesses to invest, and thus for jobs to be created. So does the lack of a tax break for capital gains.

Kerry is pushing a plan that would allow no tax on a capital gain on the first $100,000 investment in new stock in a new company, if the stock was held for a minimum of five years.

On investments of more than $100,000, the rate on capital gains would be between 5 percent and 15 percent, depending on the size of the company and how long the investment was held.

Capital gains are now taxed at a maximum rate of 28 percent.

While his idea was welcomed by the leaders, others warned this plan has a long way to go.

"It's part of a very complex dance," said Rep. Nancy L. Johnson, R-6th District, a member of the tax-writing House Ways and Means Committee. Any plan would have to package capital gains with other tax breaks so it could get broad political support.

Johnson thought it was unlikely there would be any broad tax break enacted this year, since congressional leaders have been

reluctant to offer them.

Members agreed. "I'm encouraged by the enthusiasm and the effort," said James J. Finnucan, manager of governmental affairs at Northeast Utilities. "But it's going to be difficult."

What was encouraging was that support for a capital gains break appeared to be building. Republicans have long championed a cut, but many Democrats have been more reluctant.

Kerry became more interested after a conference on Massachusetts' economic problems. Soon afterward, he made a speech on the Senate floor calling his approach "vital and fair, [an approach] that encourages capital formation and rewards patient capital."

President Bush has long favored a broad capital gains tax break, but has had trouble getting Congress to accept it. In his State of the Union speech in January, he proposed a study of the problem.

But in House Ways and Means testimony recently, Federal Reserve Board Chairman Alan Greenspan, whom Bush asked to head the study, said it would deal largely with technical disagreements and leave the more political issues to the politicians.